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Dive Brief:

Nashville Mayor Megan Barry’s proposal includes making a “substantial request” to the city’s Metro Council to “stabilize the facility until the end of the fiscal year.” After stabilizing the facility, Barry wants Nashville General to transform to an ambulatory surgical care center with only outpatient services.

The mayor also wants to create an indigent care fund to pay for hospital bills for Nashville residents who would no longer be able to get care at the city’s only safety-net hospital.

Dive Insight:

Nashville has reportedly spent more than $500 million since 2005 to help Nashville General. The mayor believes that the city could spend the money wiser by helping low-income residents get care at private facilities.

Metro Council members were surprised at the mayor’s proposal and the proposal isn’t a done deal. It still needs approval from the Metro Council, the Nashville Hospital Authority and Meharry Medical College.

Safety-net hospitals continue to struggle with finances despite the Affordable Care Act’s (ACA) Medicaid expansion that provided health insurance to more than 11 million people. In the 31 states that allowed Medicaid expansion, facilities are receiving Medicaid payments when they may have written off the services previously. That helped, but safety-net hospitals in those states still have much higher uncompensated care spending compared to other acute care hospitals, according to The Commonwealth Fund. For states that didn’t expand Medicaid, like Tennessee, hospitals saw even higher levels of uncompensated care.

“Both total and operating margins for safety-net hospitals were well below those reported by other acute-care hospitals in nonexpansion states. Operating margins for safety-net hospitals in both expansion and nonexpansion states are near or below zero, which indicates these hospitals must rely on less predictable revenues from sources other than patient care, like investment income and government tax appropriations,” wrote The Commonwealth Fund.

Meanwhile, the Kaiser Family Foundation (KFF) recently reported that uncompensated care, including charity care and bad debt, cost hospitals $34.9 billion in 2013. Hospitals in Medicaid expansion states incurred about $16.7 billion and hospitals in non-expansion states about $18.1 billion. The following year, when Medicaid expansion started, uncompensated care dropped to $28.9 billion, which is a 17% drop. Nearly all of the decrease came from Medicaid expansion states.

“The cost of uncompensated care has declined among hospitals in Medicaid expansion states, while such costs have remained flat among hospitals in states that did not expand Medicaid,” according to KFF.

That’s the situation facing Nashville General Hospital and other safety-net hospitals in nonexpansion states. The Nashville General proposal needs multiple approvals and may not actually happen, but it’s an example of how safety-net hospitals remain at risk.

The Nashville situation is also part of a larger trend of hospitals moving more into outpatient services. Sagging reimbursements and payer policies that move patients from hospitals to outpatient care and freestanding facilities are hurting hospital finances. In response, hospitals are moving into outpatient services as a way to make up for lost inpatient revenue.